In re Adobe Trucking, Inc.

Four related Texas businesses (the Adobe businesses) (debtors) involved in oil drilling had Adobe in their names. The Adobe businesses entered into a five-year revolving credit and security agreement for $37.5 million in 2006, later increased to $47.5 million in 2007, with PNC Bank, N.A. (PNC) (creditor) as the lead bank of the creditors. The creditors were granted a security interest in the assets of the Adobe businesses, including equipment and inventory, to secure the provided credit. When the price of oil dropped substantially, the Adobe businesses were shut down. In December 2008, PNC sent notice of a public foreclosure sale to the Adobe businesses. The sale was advertised by a notice of sale placed for one day in the Dallas Morning News, the Odessa American, and the Midland Reporter-Telegram newspapers. The Adobe businesses refused to turn over the collateral prior to the sale. PNC was the winning bidder at the foreclosure sale with a credit price of $41 million. Prior appraisals of the collateral had valued it at either $33.85 million or $81 million. After state court wrangling to try to prevent the sale, one of the Adobe businesses eventually filed a Chapter 11 bankruptcy. The prior suit was removed from state court, and the Adobe businesses made a crossclaim that the PNC foreclosure sale was not commercially reasonable. Under the controlling law of New York, every aspect of the sale of collateral must be commercially reasonable, “including the method, manner, time, place, and other terms.” The Adobe businesses attacked the price obtained, the means of advertising the sale, the failure of PNC to repair or clean up the collateral or make it available for inspection, the decision to conduct a public sale, and the small number of bidders on the collateral as constituting commercially unreasonable aspects of a sale.